GST Definition, Objective, Framework, Action Plan & Scope

GST was first recommended by Kelkar Task Force on implementation of Fiscal Reforms and Budget Management Act 2004 but the First Discussion Paper on Goods and Services Tax in India was presented by the Empowered Committee of State Finance Ministers .10th Nov.10th, 2009.

In 2011, the Constitution (115th Amendment) Bill, 2011 was introduced in Parliament to enable the levy of GST. However, the Bill lapsed with the dissolution of the 15th Lok Sabha.

Subsequently, in December 2014, the Constitution (122nd Amendment) Bill, 2014 was introduced in Lok Sabha. The Bill was passed by Lok Sabha in May 2015 and referred to a Select Committee of Rajya Sabha for examination.

To eliminate the cascading effect of Indirect taxes on single transaction

Subsume all indirect taxes at Centre and State Level under

Reduce tax evasion and corruption

Increase productivity

Increase Tax to GDP Ratio and revenue surplus

Increase Compliance

Reducing economic distortions

Regulatory Framework of GST

A new set up by Government of India named as ‘GST Council’.

The GST Council consists of

(a)the Union Finance Minister (as Chairman),

(b) the Union Minister of State in charge of Revenue or Finance, and

(c) the Minister in charge of Finance or Taxation or any other Minister, nominated by each state government.

All decisions of the GST Council will be made by three fourth majority of the votes cast; the centre shall have one-third of the votes cast, and the states together shall have two-third of the votes cast.

Action Plan of GST Council

List number of Taxes, cesses, and surcharges to be subsumed under GST

Preparation of list of goods and services subject to, or exempt from GST

Inter-State Transactions and the IGST Mechanism:The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.

Destination-Based Consumption Tax:GST will be a destination-based tax. This implies that all SGST collected will ordinarily accrue to the State where the consumer of the goods or services sold resides.

Computation of GST on the basis of invoice credit method: The liability under the GST will be invoice credit method i.e. cenvat credit will be allowed on the basis of invoice issued by the suppliers.

Payment of GST: The CGST and SGST are to be paid to the accounts of the central and states respectively.

Goods and Services Tax Network (GSTN):A not-for-profit, Non-Government Company called Goods and Services Tax Network (GSTN), jointly set up by the Central and State Governments will provide shared IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders.

INPUT TAX CREDIT (ITC) SET OFF : ITC for CGST & SGST will be taken for taxes allowed against central and state respectively.

GST on Imports : Centre will levy IGST on inter-State supply of goods and services.Import of goods will be subject to basic customs duty and IGST.

Maintenance of Records : A taxpayer or exporter would have to maintain separate details in books of account for availment, utilization or refund of Input Tax Credit of CGST, SGST and IGST.

Administration of GST : Administration of GST will be the responsibility of the GST Council , which will be the apex policy making body of the GST. Members of GST Council comprised of the Central and State ministers in charge of the finance portfolio.

Goods and Service Tax Council: The GST Council will be a joint forum of the Centre and the States. The Council will make recommendations to the Union and the States on important issues like tax rates, exemption list, threshold limits, etc. One-half of the total number of Members of the Council will constitute the quorum of GST council.

The four GST slabs have been set at 5%, 12%, 18% and 28% for different items or services. The brackets are steeper than the rates of 6, 12, 18 and 26% earlier proposed by the government.

To keep inflation in check, essential items including food, which at present constitute roughly half of the consumer inflation basket, will be taxed at a zero rate. The lowest rate of 5 per cent would apply to common use items.

Tax between 40 percent and 65 percent will be imposed on luxury goods like high-end cars, pan masala, aerated drinks and tobacco products.

In this Category Tax Will Be High .

A decision has also been taken to levy a cess in order to raise funds to compensate states for the revenue losses they will incur. The government estimates Rs 50,000 crore will be needed in the first year for compensation. “If we have to raise this by way of tax, we will need Rs 1,72,000 crore,” Finance Minister Arun Jaitley said.